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Transformational Leadership and the Flat Hierarchies of Holacracy

Hi everyone! I was intrigued by what Prof Audrey said during our class on Leadership and OB; it was a comment about transformational leadership and how it is usually associated with central positioning within social networks. This makes sense, since to have the combination of the four factors transformational leadership (idealised influence, individualised consideration, intellectual stimulation, and inspirational motivation) you would need to have a wide reach, and a sufficient amount of influence. That got me thinking: with a flatter hierarchy in organisations, and as “open concept” offices become more and more popular, can transformational leadership still work? Or does it have to change? On some reflection, I think it does.

That’s how I ended up looking up holacracy, a new kind of flat organisational structure invented by programmer Brian Robertson. Robertson’s explains holacracy as “regrouping around a profoundly deeper level of meaning and capability, so that we can more artfully navigate the increasing complexity and uncertainty in today’s world, while more fully finding and expressing our own highest potential” (Robertson, 2007). You can also try watching this video:

It flattens the tree-like hierarchical system that causes bottlenecks at leaders who are node points, and converts it to circular systems that overlap each other, called holons.

So, from this:

To this:

Zappos, as Chek How has earlier noted in his blog post on flat hierarchies, has adopted holacracy. The great thing about this system is that individuals have more power to take initiative and to assume leadership. Ideally, organisations become more flexible and maximise their talent pool. The response has been good thus far in Zappos, although the controversy has been primarily over how difficult it is for an organisation to teach the rules and ideas behind holacracy, and restructure itself. There will be no more CEOs in a holacracy. Change is brought about organically, and not through the transformative or visionary force of one person. People who naturally practice the affiliative, democratic, pacesetting, and coaching leadership styles are more likely to do well in a holacracy than those who naturally practice coercive and authoritative leadership styles. Generally, though, and as we agreed in class, one should practise having a mix of several of these.

The main concern I raise is that transformational leadership may not be able to thrive because individuals will be less likely to hold central positions in social networks, and so cannot exercise the 4 I’s. On the one hand, intellectual stimulation does not require initialisation from a leader since the nature of circular systems is to encourage all to participate actively. However, on the other hand, idealised influence involves followers seeing a particular trait they admire embodied in their leader; or what we also call referent power, which is tied usually to the personality of a specific individual. In a holacracy, this is less possible since people will usually only see those in their own circle, and there is no one person who is in every circle (see diagram above). Furthermore, due to varying group dynamics across circles, it may be very difficult to enforce one set of unified inspirational values across the organisation as a result of different group dynamics. Individualised consideration is not guaranteed; although employees are more able to ask for help in smaller circles, if there are conflicting concerns and needs, there is no designated individual who is obligated to be impartial from the start, as roles are always switching in a holon.

We also have seen in the Haier case how transformational leadership can be essential in cases where companies need help being turned around for the better. The power of such a leader, however, can be diminished in a holacratic system for the reasons above, and also because of the danger of groupthink.

All that said, however, it is not all gloom and doom for transformational leadership in this era of flattening hierarchies. An organisation, I imagine, can take the important 4 I’s of transformational leadership and encourage all circles to practise at least the three that do not require a singular personality: intellectual stimulation, individualised consideration, and inspirational motivation. Circles appoint rotating leaders, keeping to a set of practices agreed upon and shared by all employees (e.g. all employees must collaboratively ensure that everyone’s needs are met; shared inspirational values are agreed upon). These values, when practised across circles, can still enable companies to make the sort of vital transformations when required, such as those catalysed by Zhang Ruimin in Haier. Idealised influence may have to go, but this is part and parcel of the network shifts in a flatter system.

Thus, as holacracy calls for groups to “lead themselves”, transformational leadership can evolve and be adapted to suit such systems. I guess that comes as a relief – our leadership theories remain relevant after all!